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Sustainable investors have solid and diversified options in today’s funds market
Not only is socially responsible investment (SRI) no longer marginal, but investors have an ever-increasing range of sustainable investment options that are safe and reliable.
This article is an extract from Richard Essex’s 2014 book, Invest, Feel Good and Make a Difference, which is available now on Amazon.
In the past there has always been the criticism that the SRI universe is too marginal. It is argued that it doesn’t provide you with enough investment choice to spread your investment. However, this arena has come a long way since swampy-like figures were making hemp out of the back of cottages or wacky scientists were inventing their first wind generator. There is now a far more sophisticated range of holdings to choose from. There is now a healthy range of asset classes that you can spread your portfolio amongst.
No longer are you just looking at shares in recently formed companies. You now have access to the full range of assets. As well as equity funds, there are funds dealing in corporate bonds and fixed interests, property, as well as other alternative assets. In other words you can set up an investment to meet precisely with your overall risk profile.
This increase in the number of asset classes is again a reflection of the growth in the industry, and therefore will only continue to grow further. For example there are more corporate bonds available in the SRI market. Some of these will be from larger corporates who satisfy SRI screening. Equally there will be bonds issued by smaller companies who are becoming more developed and are now in a position to raise capital this way, as opposed to just issuing shares.
As a result of this there are more and more bond funds being established. There has also been growth in styles of investments within each asset class. This provides you with further diversification, which again helps to spread your risk. For example within the equity category you would have access to larger corporates that may tend to be a little more defensive in their nature. In other words they may be protected more in uncertain times within a certain sector.
These will be present in ‘best of sector’ funds, which tend to concentrate on companies that are leading the way in sustainability in their particular industry. The Ecclesiastical Amity International Fund offers more this style of investment with holdings that include the likes of General Electric and Glaxo SmithKline.
You then can invest in more medium sized companies that perhaps have greater growth prospects. This can often be a feature of those funds that have particular themes. The Jupiter Ecology fund is a good example.
What’s more you can now access all of these under one roof. There are funds of funds and portfolios that offer you a composite mix of all of these in one package.
Richard Essex is an independent financial adviser with Grayside Financial Services, where he is a specialist for green and SRI advice. He is also on the steering committee with the Ethical Investment Association, a member of the UK Sustainable Investment and Finance Association (UKSIF) and the author of the 2014 book, Invest, Feel Good and Make a Difference.
Photo: milena mihaylova via Flickr
Further reading:
Sustainable investment is built on trust
How sustainable investment has already changed the world
Breaking the eight myths of sustainable and responsible investment
Invest, Feel Good, And Make a Difference: an interview with the author